i still think the market can go higher. i like to say there's always a bull market still think is mark go higher. right here on "mad money." an explosive 300-point day

on wall street as investors applaud the fiscal cliff deal coming out of washington. that is our sizzle story tonight. good evening, everyone, and happy new year. i'm larry kudlow. this is "the kudlow report." let's start with kelly evans. >> reporter: a historic rally, even though we saw stocks surging. by the way, not just in the u.s. this was really a global move. the euro, though, fell off a mini cliff of its own. a little more detail coming up. >> we'll see kelly evans in just a bit. here's another big story brewing. >> reporter: a brutal political battle today over hurricane sandy aid for hard-hit new york and new jersey. i'll bring you all the tough rhetoric when we come back. and yet another big story brewing for tomorrow. john boehner, he could be facing a real challenge for his job speaker of the house. ace acosta is all over this story. "the kudlow report" begins right now.

back to the rally on the streets today. that is the total sizzle story. check out these numbers. in case you missed it, dow added 308 points. nasdaq up 93. s&p 500 surging 36. cnbc's kelly evans joins us with all the details. good evening, kelly. >> larry, good evening, from down here at the stock exchange where you practically would expect streamers and champagne. the kind of day we had to put in in context, the likes of bill gross saying he sees stocks up 5% for the year, we did 60% of that in the first trading day. a lot of people are pointing to this that there could be many better things to come than just 5% in stocks. we saw the best start to the year, at least in percentage terms for the major indexes since 2009. the russell 2,000, by the way, doesn't usually get the headlines but it hit a record high. the global dow is at a 52-week

high. germany's dax powered to a five-year high. the ftse 100 in britain was surging. why? because across the globe, investors were assured that it wouldn't be hurt more by fiscal entrenchment. we know in a couple months time, we're going to be at the renegotiations over the debt ceiling. if it looks like the gop is going to demand serious spending cuts as part of this resolution to lift the debt ceiling, that's when you could see stocks start to sell off again around the globe and that's why i just want to point out today, we did see the euro riskly a risk gau-- us risk gauge currency. a cautionary sign perhaps even amid all the euphoria. >> you absolutely surmised correctly, i think. the gop is going to insist on large spending cuts in return for a debt ceiling increase. we have senator ron johnson with that story coming up. kelly evans, as always, thank you very very much. now, today a relief rally,

or is there more to all of this? let's get a real bull and a real bear to duke it out. me, i'm giving the deal one cheer out of three. i'll explap win why later. we've got don luskin. let me talk to don. you are not roaringly bullish on this story. my question to you, with all these growth stocks rising today, you had the transports, the small cap, the banks, the materials, you had industrial. so it's got economic growth written all over it. is it possible that investors took a look at the deal coming out of the house and said you know what? it wasn't as bad as we feared. the higher tax rates on investors, less onerous than we worried and we're celebrating that. is that possible? >> yeah, i guess it's possible, but you call these all growth sectors. in fact, they're just high beta sectors. you get a day like this, of course they'll do better. you get a bad day, they'll do

worse. that happens every time. as for the details of this deal, the details were in the market monday. the only difference now is the house passed it. so this is a relief rally. the problem with relief rallies is once we know we're not going to fall off the fiscal cliff, you can't know that again. you only get that fact once. so it's like okay, great. i survived. i'm not going to die. but that still leaves the question of what's for dinner and how am i going to earn the money to pay for the dinner? i look forward to this coming year, i see an economy that for three and a half years came out of a great recession and has not had a great expansion, and now we're going to add higher taxes. the so called american taxpayers relief act doesn't give tax relief to anyone. it raises taxes on everyone. rich and poor. >> let me get jack in here. you've got the s&p up 20% for the year. everybody loves an optimist, including me.

but what don says is true, actually. the payroll tax is going back up substantially for the middle income people and the upper income people do have tax hikes. maybe for the investors, movers and shakers, the tax hikes are less onerous than they feared, but on the other hand, we are facing a wall of higher taxes. jack, why do you think the s&p is going up 20%? >> well, for a couple of reasons. first of all, i don't like disagreeing with don. don is usually right on target. but this time i think he might be a little off. the bears misread this entire market, larry. right from the beginning, they have been looking at valuation completely wrong. you've heard me say time and time again, we have had a suppressed multiple on this market. quite frankly for all the reasons that don just described. now, the real question is what's ahead of us. i think this was more than a relief rally. i've got a feeling that this was a bit of a short rally. but the real money hasn't even come in yet. according to our calculations, we've still got $23 trillion

sitting in fixed income assets that have a negative return tie to them. it's a question of how much of that works its way in. what we saw today i think might be indicative of what we see over the course of a year. large strategic asset allocations moving out of fixed income into equities that drives the market up to what i think is the norm. that is probably a 16 or a 17 multiple to this market. i'm not talking 20 or 25. >> don, let me get your reaction to jack. i do want to come back to some of these sectors, because i think when you get text stocks, that's a cyclical growth area. that's a global area. you get the banks, you got the same thick. industrial stocks, material stocks. it has all the makings of a risk on trade, which frankly, in my view, could run here for the whole of january until we get into the ugly debt ceiling stuff in february. >> i can't disagree with that, larry, because i think you're

bargaining against yourself against your first statement. right now we're talking about something that might last through january. okay, great, big deal. timie ining is everything, but rally could have been done already. maybe there's some kind of euphoria about some kind of perceived political coherency where big daddy obama has beaten back the nasty republicans and now there aren't going to be -- no more brinksmanship, no more cliffs, it's all fine, they're going to roll over on the debt ceiling, it's all good now. maybe everybody is thrilled with barack obama as they were with george bush right after 9/11. that had some legs. that lasted for a while, but it ended in tears and so will this and that's really all i'm saying. >> jack, i only give it one cheer. i'm trying to be optimistic. what is your single favorite investment sector, jack? >> i think we have to look at technology. right now you have got creative destruction that has worked its way through. medical bills sneak up on you. corporations have to migrate to the cloud.

it's now a question of survival. it's no longer a question of when to do it, it's a question of now i have to do it. so look for that. >> yes or no, jack, one word, yes or no, does the market continue to rally tomorrow? one word. >> yes. >> don, one word? >> let's make it fun -- no. >> all right, you got it, gentlemen. two of our absolute favorites. stock market investors cheered the fiscal cliff deal today. over 300 points. a new and probably very nasty battle on the debt ceiling is coming up next. president obama has promised new tax increases for his second term, so how are republicans going to counter obama's 2013 agenda? joining us now is wisconsin republican senator ron johnson. mr. johnson, as always, welcome. you voted for the fiscal cliff deal. as you know, there were no spending cuts. what was the ratio, 41-1 or

something like that revenues over spending. what are you going to do about the debt ceiling? >> well, first of all, happy new year, larry. listen, what we need to start doing in the debt ceiling is point out the fact that president obama -- okay, president obama, you won the election, we got that. you got your punishing success tax revenue. you got that. now, you also campaigned on the fact that you were going to have a balanced approach to deficit reduction. so this revenue increase will supposedly be about 5% of the deficit. what are you going to do about closing the other 95% of the deficit? what is your plan, mr. president? what's your plan to save social security? what's your plan to save medicare? how do you plan to rein in the growth of government? how do you plan on reducing the deficit and stabilizing our debt? this is all about demanding from the president, and quite honestly, democrats and the senate to show us your plan. hey, harry reid, how about passing budgets for the first time in three years. how about being willing to be held accountable for a change. >> these are all great fiscally

prudent managerial notions as a former businessman, i expect nothing less, but senator johnson, you know you're not going to get all that. and i guess my question is will republicans in the senate hold up a debt ceiling unless and until let's say they get a spending sequester or substitute or something that you can get your arms around. >> well, certainly what i'm going to be pushing for, larry -- one of the things i've been pointing out is we've had this revisionist history that said the last debate resulted in a debt downgrade because of the messy debate. that's not what caused the debt downgrade. what caused that debt downgrade is the fact that the debate did not result in a solution to the problem. when president obama unbelievably said we're not even going to have a debate this time. oh yes, we are, mr. president. because every time you come to congress and you ask for the authority to increase the debt burden on our children and grandchildren, that is a debate that we must have and that we will have, and the time, let's do it in public.

let's utilize regular order. let's utilize the floor of the senate. supposedly the greatest body that harry reid has turned s ee a deal making body. that's got to end. that's how we do it in the senate. >> obama is going to ask probably for a couple of trillion dollars of higher debt. he wants to raise the limit. in fact, an article today says he is expected to add 3.4 trillion. 3.4 trillion in debt. >> absolutely not. >> by 2017. and he has earlier said he is not going to go through the same debt ceiling holdup that he went through last year. he'll probably go for at least a two-year package. will you give it to him? >> no way. we just went through $2.1 trillion of additional debt ceiling in 17 months. it took us 200 years to incur $2.1 trillion through our founding from 1986 and we went through that in seven months. your citizen of the debt is

$51,000. a citizen in greece, their share is $36,000. no way. we're going to have to start issuing smaller increments of increasing the debt ceiling until we actually get the solution to the problem enacted into law. >> that might be the strategy. in other words, small increments on a monthly or bimonthly basis, instead of holding up the debt and defaulting, which would drop our credit, you're saying the gop may call for small increments until a real spending cut package can be worked out. is that the strategy? >> that would be my strategy. i would love to solve this problem by the end of february early march. that's not going to happen because president obama is utterly unwilling to rein in the size of government. we're going to have to message, message, message. pound home that point. maybe do something incrementally, message again. give something. continue concessions until we fix this problem once and for all. >> senator ron johnson, sir, happy new year. as always, thank you for joining us. >> same to you.

have a good night. in yet another sizzling story tonight, the question is whether john boehner is in danger of losing his job as speaker of the house. the conservative rumor mill is just running wild over this. that's not all mr. boehner is getting hit with. the delayed hurricane sandy relief bill has democrats and republicans in the northwest completely fuming. just listen to what new jersey governor chris christie had to say today. we'll be right back with some breaking news on this story. >> america deserves better than just another example of a government that's forgotten who they are there to serve and why. 66 days and counting. shame on you. shame on congress. at a dry cleaner, we replaced people with a machine.

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angry news conferences and attack statements from republicans as well as democrats are flying everywhere and they're directed at speaker john boehner. eamon joins us from washington with the details. >> reporter: the new york-new jersey delegation met with john boehner and came out with a commitment to have two votes on hurricane sandy aid. the first on friday will cover $9 billion in aid and a second vote on the 15th of january will

cover the additional $51 billion. that marked the end of an amazing political drama today. it all started last night when boehner adjourned congress without addressing the aid for sandy victims. republicans and democrats took to the floor. >> these people have no problems when it comes to raising money. it only comes to allocating money that you cannot do it. we cannot believe that this cruel knife in the back was delivered to our region. >> this is the time to stop debating and take the gloves off, jersey-style. >> reporter: the pressure on boehner ratcheted it up when new jersey governor chris christie stepped up to the microphones in the garden state. >> there's only one group to blame for the continued suffering of these innocent victims, the house majority and their speaker, john boehner. it's just -- it is why the american people hate congress.

it's why they hate them. and governor cuomo and i are as two frustrated as two people can be, because unlike people in congress, we have actual responsibilities. and we have a responsibility to make things happen. >> reporter: tough words there. president obama joined the fight earlier in the day, demanding that the house take action to move the aid package. you can almost imagine that john boehner felt a little bit today like the last politician to get hit by an obama-christie one-two punch. that was mitt romney. >> ouch. thank you, eamon. let's get to our two special guests to kick this around. i say happy new year to both of you, gentlemen. my old friend charlie wrangle, it looks like peter king prevailed. $9 billion in flood insurance this friday and another $51 billion in relief the following friday, which gets you to the $60 billion in the senate. is this battle over and won,

charlie? >> as far as i am concerned, i think it was a good day for the congress, peter king and so many other republicans that don't normally find this coalition with democrats did come together. as we said, it's for the tens of thousands of people that are suffering as americans. and we didn't do it in a nice way, but we did come together and we're moving forward, and as far as what happens to boehner, he's been beaten up enough on by his own team, so i don't have a dog in that fight. >> all right. let me just ask you, we are basically bankrupt. we're borrowing over a trillion dollars a year. yes, we are compassionate. yeah, i want to see all these victims in staten island and new jersey and new york get their due. i do, i do, i do. but there's a lot of pork in this. stuff that will never get to the victims. >> oh, there's stuff for alaska

fisheries, there's things for the kennedy space center, the roof on the smithsonian, job training. it's not a very good bill. as much as i think that my colleagues from new york and new jersey and pennsylvania were mistreated by not getting a vote, i do intend to oppose the vote because it is full of pork and it's not paid for. there may have been a time in this country where it was okay to borrow money to cover national disasters like what we've been through in the northeast. those times have come and gone. again, as much as i sympathize with them for the mistreatment they've received for the last 24 hours, i will be seeking to try and kill this bill until it's paid for. >> you're going to kill this bill until paid for. >> i'm going to try to kill the bill until it's paid for. probably lose. >> that type of thinking has nothing to do with our great country. it is true the senate by nature can't help themselves in putting things that are not relevant to a bill into the bill. and i wish the house had prevailed and worked this like we normally do. having said that, it's not just

in terms of cutting spending and think you're saving money. if we don't really protect the people, not just for today and tomorrow, but for decades ahead of time, we'll be coming right back doing this again. the whole idea of having to pay for a disaster is not the american thing to do. we don't even do it with foreign countries, so we don't expect that we would have to do it with americans. >> i agree with charlie. >> okay. >> people in the tristate area need the help. but mr. mulvaney, so much of this will not go directly to the problems of the hurricane and they don't really go directly to the individuals. for example, besides the $150 million that are going to go to alaskan salmon -- i don't know what the salmon are going to do with all that money -- there's $9 billion, as i understand it, that goes for future planning for future disasters, and it seems to me since that doesn't go directly to the victims, we

could wait on that $9 billion and try to pay for that planning exercise. >> it's bigger than that. this is $60 billion. it's almost as much as the new taxes in the fiscal cliff bill raised last night. it's an obscene amount of money. in fact, it's so large that the supporters of the bill actually admit that they can't even spend that much in a year. there's no reason to appropriate that much money. the way that the house is going to shape it up, by the way, is vote on $9 billion by friday and in the middle of next month, vote on another $51 billion. but that will be broken into two pieces, a smaller piece that the house leadership supports and a bigger piece that it's unclear as to who supports. so we will effectively take up the whole $60 billion eventually, but it will be done in pieces, because this is a huge amount of money. >> none of the delegation is supporting any parts of this money that's not directly related to easing the pain and the sorrow of those americans that got hurt. now, it's supposed to have gone

through some scrutiny with the senate. but i think both of us would admit that what came over, we didn't have the time to look at it. we're talking about an emergency situation. and it's not as though you're holding democrats and republicans hostage. you're holding victims hostage. if you want to say that we got to monitor this, oversight this and knock out things that you find are not relevant, count me in on that. but for god's sake, this isn't the time to start changing the rules, since the beginning of this country, we've never done that. >> we're not trying to delay the bill. we're trying to pay for it. i live in a hurricane-prone state. i'm not one of these that thinks it's not the federal government's business. i believe it's the government's business. i just think we have to pay for it. >> people are suffering. it's not an easy thing to do. >> i think the money will be delivered as it should. and i hope it goes directly to the victims. charlie rangel, great to see you again. nick mulvaney, thank you for

coming on. we do have some breaking news tonight on hillary clinton. we'll have that next up. and please, generally, this is a good night to remind, please don't forget, free market capitalism, the best path to prosperity. let's reward the successful. this is america. i'm kudlow. we'll be right back. [ male announcer ] at scottrade, you won't just find us online, you'll also find us in person, with dedicated support teams at over 500 branches nationwide. so when you call or visit,

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we're going to go right to breaking news. let's just change the whole story here. put the teleprompter aside and let me go to my pal bertha coombs. you've got some information on hillary clinton. >> that's right. she's been in the hospital. she had that blood clot that they were monitoring. secretary of state hillary clinton, though, has been released from the hospital tonight. she and her husband were seen outside new york presbyterian this afternoon and her spokesman says the medical team advised her that she's making good progress on all fronts. the fbi says it conducted a record number of instant background checks for people wanting to purchase guns last month. just under 2.8 million checks. that's about a million more than december 2011. for the full year, the fbi said it processed 19.6 million checks, almost 20% more than the prior year. and "the new york times" reports tonight that current tv led by al gore is being acquired by al

jazeera. al jazeera has tried for years to get broader distribution for its english language channel and according to "the new york times" will create a new new york channel based in new york. >> all right, shows we are a freedom loving country. >> first amendment. >> thank you very much, and a good happy new year to you. we'll take a quick break and talk about john boehner's fate and whether mr. obama is a go for gun control and immigration reform. this is kudlow. stay with us. suddenly, she does something unexpected

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welcome back to "the kudlow report." in this half-hour, will it be out of the frying pan and into the fire for john boehner? just after the fiscal cliff battle ends, he may be in the fight of his life for his job. we're about to get two very different points of view on what's going to happen tomorrow when the vote for speaker takes place. and remember spending cuts and tax hikes at the same time? will we ever get them? highly doubtful. we'll debate those key issues, and i'm going to explain to you why i give this whole deal just one cheer out of three. but right now, let's get to

the latest on the fate of john boehner. john harwood joins us now with all the details. good evening, john. >> reporter: good evening, larry. it's been a rough couple of weeks for john boehner, trying to negotiate a deal with the president. that didn't work. he went to plan b, his own caucus rejected plan b. the senate sent over a bill that was worse than plan b from a republican point of view. the speaker had to accommodate the views of members of his caucus who didn't like the lack of spending cuts in that bill, so they went through the motions of considering an amended bill. they did a whip count and found that it wasn't going to work. then they had to vote on the senate bill. he voted for it. eric cantor, his deputy who had long been rumored to be after his job, voted the other way. and so john boehner has been in a tenuous position. and then you had the controversy over hurricane sandy. he decided in deference to the spending concerns of some of his members to put off that vote last night and was blasted today by chris christie, the governor of new jersey, by peter king and

other members from northeastern states, so he's gotta election tomorrow. i've got to tell you, larry, i spoke to a republican member who messaged me from inside a conference meeting and said there are no serious challenges to john boehner. there is a movement to have some nuts, as he called them, vote present in the speaker's election, but there won't be enough of them to matter, larry. >> wow, nuts voting present. john harwood, thank you very much. we'll talk to you tomorrow about this same story. let's go to two different viewpoints. we have two different people on mr. boehner's future. ron meyer, press secretary for american majority action. and robert costa, national review, washington editor and cnbc contributor. mr. meyer, you are relentless, you won't take no for an answer. what's your take on the boehner story now? >> my take is that before this conference, we definitely had 20 members who were willing to do this. the fact of the matter is that i

think boehner in the conference tried to convince people that he would be hard on spending, but i'm not sure that's the case. i think the point is that speaker boehner will lead the house gop out of the majority in 2014. we will lose the 2014 election, lose the house if boehner is speaking speaker. he's less popular than nancy pelosi. he just signed an agreement that has $41 worth of tax hikes for every $1 of spending cuts. it actually delayed the sequester. >> i get that. i'm just giving it one cheer for stopping the recession. that's all it did. let me go to bob costa. robert, what are you hearing about the boehner story. how much trouble does he have, plan a, plan b, now the hurricane sandy, as our own john harwood reported. i don't see any options, robert, but you tell me. >> with all due respect to my friend ron, i'm going to have to throw a little bit of cold water on all this anti-boehner chatter. is there discontent within the rank and file of republican

members of the house? yes, there is. is that going to be enough to mount a coup, a revolt on the house floor? i very much doubt it. eric cantor, did they vote against the plan? yes. but just because you vote against the plan doesn't mean you're about to run against the speaker of the house of representatives. i think there's brewing discontent among the republicans, but boehner is going to be fine tomorrow. i've heard from aides close to the speaker that he feels very confident that he'll have the full support of his conference. maybe a few people will vote against him, but the majority will be with boehner. >> nobody is going to vote present. first of all, let's remember, five members ran on not voting for speaker boehner. five new freshmen coming in tomorrow, that will be sworn in tomorrow said that they would not vote john boehner for speaker. we've heard four or five others say publicly they won't vote for john boehner for speaker. i've talked to enough people where there's more than 20 people considering this. it's a legitimate plan.

>> that's not enough to cause a real problem for boehner. >> yes, it is. 20 is more than enough. if you talk to the house, you only need 17 people to challenge. >> it's going to cause trouble on the floor. but my whole point is this. if you're going to go at boehner, you need to have a real challenger. you need to have cantor, mccarthy, tom price. all these people have declined interest publicly and from what i've heard privately, they're not expressing my interest in challenging boehner. my question to you, if this movement is real, who is the challenger? >> well, eric cantor has wanted the speakership for a long time. >> eric cantor is with boehner. he's been working with boehner this past week. who's the real challenger if not cantor? >> listen, eric cantor has the best chance. there has been rumors inside the house that he has circulated a paper to actually think about ousting boehner. >> what kind of paper? wait, wait. that's a very important charge. what kind of paper is mr. cantor

circulating? and bob costa, do you know anything about that? >> there were serious rumors circulating the last few days that cantor or some other senior -- establishing republican, so nobody that i'm working with, it was just a one-pager, saying how basically to get it on the floor, and who to vote for besides john boehner. >> bob costa, do you know anything about that? >> with all due respect to my friend ron, i've spoken to aides close to speaker cantor, they are not working against boehner. >> of course not. he might as well be the pr agent for cantor. >> i think people are misinterpreting cantor's big nay vote yesterday, which was very significant. he broke with the speaker. but at the same time, he is not a machiavellian character at the moment. >> you think for this debt ceiling deal, it's going to be all right to have $41 in tax hikes for every $1 in spending cuts? >> you're making a point that there's a rumor about a paper that cantor is pushing around.

>> my point is the activists across the country need to get out and call out a member of congress. >> i've got to -- >> i've been at the house caucus meetings, larry, and i've heard nothing about papers from cantor or anything like that. >> i've made a couple phone calls and i don't hear anybody. >> larry, i appreciate the opportunity. >> we've given you your due and we will continue to give you your due. robert costa, as always, inside and outside of all these stories. now, turning back to the fiscal cliff deal, it is done, at least for now. obviously the markets love it so far. but i've got to give you my take on this. then jared and jim will respond. i'm not thrilled with the deal, but next up i'll tell you why. [ male announcer ] where do you turn for legal matters?

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to volunteer to help those in need. when a twinge of back pain surprises him. morning starts in high spirits, but there's a growing pain in his lower back. as lines grow longer, his pain continues to linger. but after a long day of helping others, he gets some helpful advice. just two aleve have the strength to keep back pain away all day. today, jason chose aleve. just two pills for all day pain relief. try aleve d for strong, all day long sinus and headache relief. welcome back. here's my quick take on this whole fiscal cliff deal. you know what? i give it only one cheer out of a possible three. that's because congress averted recession by extending and making permanent nearly all the bush tax cuts. clearly this helped create today's huge rally in stocks. okay, that is good, no recession. and the upper end tax hikes probably turned out to be less onerous than investors feared.

but it's not great, virtually no spending cuts. in fact, as the prior segment noted, a 41: 1 ratio of tax revenues to spending cuts is just appalling. besides economic growth, washington has to understand spending is the real problem for deficits and debt. and lastly, why is this country taxing the most productive earnings? investors in small business owners. it's just class warfare nonsense. it reduces incentives for the long run. it's all wrong. i'm for free market economic prosperity, not class warfare. let me just tell you this. taxing rich people, taxing upper end successful earners, you can't tax your way into prosperity. you can't tax your way into a balanced budget. you doubt me? just take a look at europe. particularly western europe. anyway, i'm going to get some comments on my little rant. here now are jared bernstein, former vice president biden

chief economist. jared, i'm sure you agree wefrg i said. how do you react to my one cheer? >> i always enjoy listening to you. i think you're being an awfully harsh grader here. averting recession and you give it 33%? >> right. >> and then the markets. i always think of you as someone who thinks the markets are conveying information, but you're disagreeing with them. >> that's the one cheer. i give it that. >> so look, the one thing on the spending side, let me say this. i know you and jimmy and others are fired up about that. you have to appreciate that the budget control act cut $1.5 trillion of spending starting in 2011. i think one of the problems that you guys are having is you're starting the clock today, this is an incremental plan. anyone who calls this a grand bargain, the last step of the way is obviously wrong. it's an incremental plan. we got 1.5 trillion in spending

cuts. i didn't go around saying the ratio of spending cuts to is 1.5 trillion to zero because i knew there was revenue coming. we have to take a slightly longer view. >> jimmy, suppose you're talking to a main street middle western person, husband and wife, got some money in a 401k, got some money if a broker. they want to know what does this mean for job creation? what does this mean for economic growth? what does this mean for deficits and debt so that america doesn't become europe? >> well, it's not going to add a single percentage point, decimal point to economic growth. in fact, it will take away. what it does for deficit reduction is an absolute rounding error. it doesn't do anything. it does stop the recession, which is not a small thing. i would give it an incomplete until i see what happens in february and march. if we walk out of this thing

with something that replaces the question of deep spending cuts, another 1.2 trillion, $1.5 trillion in spending cuts, and no tax hikes, then you look at it differently. but i think the president will push for a lot more tax increases, another 500, $800 billion is his price for the sequester. >> all right, jared, i couldn't agree more with jimmy if i said it myself. in fact, i have said it myself. he is not going to have a spending sequester and he wants another, what, $600 billion or $800 billion in taxes on top. >> a lot of what jimmy said rez ma -- resonated with me as well. he said he'd give it an incomplete. i think that's fair. you have to ask yourself what's the next step. let's organize this conversation about deficits. i've been listening to it all night and it's all over the map. i hope you guys would agree with me that the goal should be to stabilize the debt to gdp ratio in the ten-year budget window.

in order to do that, i think you need about -- and jimmy said this number. i think you need about 1.2 trillion more of deficit reduction. i think it would make sense to split that between tax revenues and spending cuts. >> but jimmy p -- all right, i'm a supply side. i'm a reagan supply side. you want to get these ratios down, spending to gdp, deficits to gdp, debt to gdp. why don't we grow that denominator, call it gdp. why don't we create incentives for ordinary people to work a little harder at the margin, maybe take a risky investment, maybe start up a new business, even a small business. we're not doing that. that's why we're not going to get the gdp and the growth effect. >> if you want to do something about the debt, all right, the wrong way to do it is making it, you know, $1 of tax hike for $1 spending cuts. whatever countries have tried this, they are heavy on the spending cuts, light on the tax

increases. they're not 50/50 or worse, what is what the president wants and apparently which is what jared wants. this is going to be heavy on tax hikes, just the opposite of what we need to do, deficit and growth. >> i've got to leave it there. jared, i'll give you 5:1, spending cuts to revenue increases. >> that's a tough ratio. >> that's just about right. >> the republicans that night in the primary, they all said no to 10:1. i'm okay with 5:1. jeb bush is okay with 3:1. >> i'll go to 2:1. no way should democrats accept 5:1. >> gentlemen, happy new year. now, president obama has said a number of issues are going to be his top priorities for 2013. i'm afraid raising taxes is one of them, but perhaps more interesting, gun control and immigration reform. which one is his real number one goal? we've got a powerhouse panel to give us their best guest next up on obama's priorities. ok who's .

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of course the new year is a time to make resolutions, set new goals. what will president obama's resolutions and goals and priorities be for 2013? let's bring in karen finney, the hill columnist and former dnc director. jennifer ruben, author of "the washington post" right turn blog. peter souterman, reason magazine senior editor. karen, i think his top priority,

or nearly so, are going to be immigration reform and gun control, both of which are very weak spots for the republican party. what is your thought? >> you know what, larry? we agree. although i would add to that that obviously given the structure of the so called deal that we got over the course of the last 24 hours, part two, is going to clearly be at the top of the agenda starting next week, and obviously with the debt ceiling. so that sort of economic piece. but then in addition to that, absolutely, immigration reform. and i would call it gun safety because i don't think there's much control going on, will absolutely have to stay at the top of the list. >> and jen, let's leave the economic stuff aside. we've done the whole show on that and sick of the fiscal cliff. i think the republicans have got a serious problem on immigration reform, ok? they're much too restrictive on that and kind of mean sounding, mean spirited. and secondly, on the gun control, or as karen calls it,

gun safety, i think the gop also has a problem if public opinion is to be believed. >> yeah, i think i would certainly agree that on immigration, the republican party needs to really do some self-refle self-reflecting. when you have people like rand paul and people like jeff flake, now in the senate, saying listen, we have to look at this, the current system is not a law and order system, it's a lawless system, frankly, we want to get some revenue into the system? let's talk about the underground economy and get those people paying taxes like everyone else. there's a lot to be done on immigration reform. given the dysfunction in both houses, i don't think we're going to get anything on the gun front. and this is why. unless you have mitch mcconnell and/or john boehner pulling strings, nothing gets done in this arrangement with split government. and neither of those guys are going to be too keen to do anything on the gun front. so maybe get some small compromises around the corner, but i actually think you might have a better shot at immigration reform. >> actually, to put the gop on

the defensive. peter, i'm for hunters, i'm for rifles, i'm for hunting, i'm for handguns. isle even for concealed handguns. how's that? but here's what i'm not for. i'm not for these automatic weapons, or semiautomatic weapons. i'm not for these hundred ammo bullet clips. i don't see what the heck that has to do with hunters and i think that ought to be changed and i think the democrats have a leg up on their republicans on that issue. >> i think that we're going to see a small push for some sort of gun control in the relatively near term just because it's a hot issue. i think the bigger push for obama's second term is going to be immigration reform. he likes blockbuster legislation. he likes big ticket overhauls. he wants to be seen as a transformative president. immigration reform is one way he could do that. >> also remember that with immigration, we've got mid-term elections coming up, so from the perspective of the republican party, not just change their tone, but change some solve

policies and embrace the fact that a majority of the country, for example, supports a path to citizenship, so some of those key allies will have to be in legislation and that will be important to both parties when we get to the mid-term election. >> karen, i hate to say that, but i totally agree with you tonight. [ laughter ] >> i do, too, which is even scarier. >> this is totally a republican weakness heading into another set of elections. there ought to be a path to citizenship. they'll pay their taxes. it can't all be harsh self-deportation. it can't be, you know, just control the borders. mitt romney's self-deportation may have cost him the entire election. jen, obama is very smart. in some sense, he's already broken the gop on upper end tax hikes. we're going to hear more on that. now we might go right to another spot besides gun control and immigration. republicans are so weak on immigration. >> yeah, but they need to listen to you and karen and myself.

we are the opportunity party. we're the entrepreneurial party, the biggest entrepreneurial act you can have is immigrating to another country and starting over again. this is something that should turn into a win-win. i hate that phrase, but it surely applies this time. the president does want to win. he disappointed hispanic voters in the first term, he never brought anything up. but the president, unlike the way he has operated on other pieces of major legislation, it's going to actually put a plan out there and get behind it. do what george bush did. put a plan out there and got real close. >> bush and mccain and a lot of good people put their plan out and just got slaughtered. peterson, last one to you. you believe for one nano second that this congress and this president will generate substantial spending cuts and substantial entitlement reforms, which might help us stay out of bankruptcy? do you actually believe that? >> not for a second. i think we're going to see fake spending cuts, fake entitlement

reform. president obama talks a lot about his willingness to reform medicare, to cut medicare, but if you really look at what he's willing to do, it's small ball cuts. he wants to change the way we pay providers. not the real structural changes and benefits and entitlement reforms that we actually need that are actually going to get the program under control. >> sorry, karen. i can't buy into you on that subject. we've done very well tonight, but not on that subject. >> all right. >> i'm sorry. no, go ahead. finish your sentence. >> i just want to remind you that the president puts a more substantive stuff on the table last year and it was john boehner who walked away. just a reminder. >> jen, we're going to have to come at her next time. she's got that whole story all wrong. >> she sure does. >> we agreed on something tonight! >> peter, it's just much ado about nothing. that's why i think obama is going for the social issues on immigration and gun control. thank you karen, jen, peter.

that's it for tonight's show. i'm larry kudlow. thanks for watching. great to be back in the new year.